Drug Price Requirement for TV Ads Gets Day Before Appeals Court

Jan. 10, 2020, 10:45 AM

A requirement that drugmakers disclose their products’ list prices in television ads heads to the D.C. Circuit in a case that will test the government’s authority to regulate commercial speech.

The U.S. Court of Appeals for the District of Columbia Circuit is slated to hear arguments Jan. 13 and could tackle central First Amendment questions that a lower court judge chose not to address.

Drugmakers Merck & Co., Eli Lilly and Co., and Amgen Inc., along with the Association of National Advertisers, argue the Department of Health and Human Services can’t compel speech by requiring them to include the list price—particularly because that number can be misleading. Actual out-of-pocket costs vary dramatically depending on an individual’s insurance coverage and other factors.

The HHS has argued that commercial speech is afforded less constitutional protection than other forms of speech. It maintains that the rule, which the U.S. District Court for the District of Columbia struck down, doesn’t violate drugmakers’ First Amendment rights.

The case comes as the Trump administration—and both parties in Congress— seek ways to bring down the cost of medication. It will be a test of the federal government’s authority to impose new rules on the pharmaceutical industry via the Social Security Act.

“If it’s held that the law doesn’t give you permission to enact the regulations here, then one could theoretically apply that in other situations and limit the government’s ability to enact other rules and regulations,” Craig Whitney, a partner in the litigation group at Frankfurt Kurnit Klein & Selz PC who is not involved in the case, said.

On the other hand, if the government is successful, it could open the door to more leeway for the government to enact rules and regulations in a way that isn’t explicitly stated in law, he said.

The case will be heard by Judges Karen LeCraft Henderson, Patricia A. Millett, and Harry T. Edwards.

Congressional Intent

U.S. District Judge Amit P. Mehta struck down the rule in July, finding the HHS lacked statutory authority to issue it.

It could “swing the doors wide open to any regulation, rule or policy that might reasonably result in cost savings to Medicare and Medicaid programs, unless expressly prohibited by Congress,” he wrote.

Mehta didn’t address the First Amendment issue in his decision. He instead focused on his stated belief that Congress never intended agencies to have such broad authority.

The Trump administration appealed in August, later arguing in court filings that Mehta reached a “mistaken conclusion that HHS lacks statutory authority to promulgate the rule.”

The drugmakers contend that the rule amounts to “agency overreach, plain and simple.”

“If Congress wished to give HHS the authority to regulate anything that might conceivably affect healthcare prices in the United States, it would not have buried that breathtaking power in generalized provisions giving HHS the authority to operate public programs,” according to the drugmakers’ November filing.

Consumer Confusion

The CMS acknowledged when it published the rule that the requirement could lead to consumer confusion and deter patients from seeking out medications that would benefit them.

The reason is that few consumers ever pay the list price for drugs.

For example, Amgen’s drug Prolia, which treats post-menopausal osteoporosis, has a list price of $1,219.06 for an injection every six months, but patients can pay anywhere from nothing to $667.29 out of pocket, depending on their health coverage, according to Amgen.

Despite that, the government has asserted that some information about price is better than nothing—and if drugmakers are worried that a high list price would deter customers from pursuing a drug, then pharmaceutical companies should consider lowering their prices.

The case is Merck & Co., Inc. v. HHS, D.C. Cir., No. 19-5222, oral argument scheduled 1/13/20.

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com

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